Crude oil, SPY, UUP, and gold ETFs react to the FOMC and US dollar (Part 4 of 5)
(Continued from Part 3)
Gold drops to two-week lows
Gold prices dropped more than ~2% on January 29 , 2015, to $ 1,254 per ounce after the Federal Open Market Committee (or FOMC) meeting. The FOMC, at its January 28 meeting, said it would increase interest rates later this year on improving economic conditions and a strong labor market.
The gold price decline reflected in the SPDR Gold Trust ETF (GLD). GLD fell ~2.16% and closed at $ 120.76. Gold and GLD price movements affect other ETFs and stocks, like the iShares Gold Trust (IAU), the Market Vectors Gold Miners ETF (GDX), the Market Vectors Junior Gold Miners (GDXJ), and Goldcorp (GG).
The US dollar index increased after the FOMC meeting and started appreciating. The strong US dollar index also led to the decrease in gold and GLD ETF prices. Since gold is dollar-denominated, an increase in the dollar index will have a downward impact on gold and its ETFs. However, the GLD ETF saw a net fund inflow of $ 507.15 million between January 22 and January 28, 2015.
The US Department of Commerce, on January 30, 2015, releases estimates of Q4 2014 US gross domestic product (or GDP) data. Preliminary consensus shows GDP should increase by 0.5% in Q4 2014 compared to 0.7% in Q3 2014. These estimates should positively affect the US dollar and, in turn, gold prices.
Bullish news could push the GLD ETF to its next resistance of $ 124. Its support is at $ 118. The relative strength index (or RSI) is in overbought territory. This suggests prices could correct. However, the moving average convergence divergence (or MACD) is above the zero line, suggesting a positive price movement.
Continue to Part 5
Browse this series on Market Realist:
- Part 1 – Crude oil slips to $ 43.81 after inventory data and oil glut
- Part 2 – SPY rallies in the afternoon and closes higher at 2,021
- Part 3 – The PowerShares DB US Dollar Index Bullish ETF (UUP) gains
- Investment & Company Information